A jumbo loan is a mortgage for an amount above the maximum loan size set by government agencies such as the Federal Housing Finance Agency (FHFA). Fannie Mae and Freddie Mac can't buy or guarantee these loans, and that is the key difference from a conforming loan.

Jumbo vs. conforming loans

The main difference is the loan amount. Any loan above your area's conforming limit is treated as a jumbo loan and gets a closer look. Those limits vary by county and change from year to year, so confirm the current limit for the area where you're buying.

• Conventional loans typically require a lower down payment than jumbo loans
• Jumbo loans usually require more cash reserves
• Underwriting is stricter, with a lower debt-to-income ratio

Who jumbo loans fit

Jumbo loans suit buyers of higher-priced or luxury homes who have the income and credit history to qualify.

Typical requirements

Requirements vary by lender, but you can generally expect:

• Credit score: Higher than the conforming minimum, often 680 to 700 or higher
• Down payment: Depends on the lender, the purchase price, and your credit score. Some lenders allow as little as 10% down, while 20% or more is common
• Cash reserves: More money set aside after closing than a conventional loan requires
• Debt-to-income ratio: Lower than for many conventional loans
• Documentation: Bank statements over time to verify your closing funds and reserves, plus proof of steady income

Rates and terms

Jumbo loans are available as 15-year or 30-year fixed-rate loans, adjustable-rate mortgages, and with some lenders, interest-only options. Jumbo rates were historically higher because of the added risk for lenders, but that has shifted. At times, jumbo rates are even lower than conforming rates. Additional fees and costs can apply, so compare fixed and adjustable options and jumbo and conforming scenarios side by side.

Why choose a jumbo loan

A jumbo loan lets you finance a higher-priced home in one loan, instead of stretching to stay under the conforming limit. Depending on the lender, there may be additional benefits as well.

Bottom line

If you're shopping above the conforming limit, a jumbo loan can make the purchase possible, but it pays to compare your options and get your documents in order early.

Reach out, and our San Diego team will help you see what fits your situation.

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Requirements shown are typical examples and vary by lender and program. This is general information, not a loan commitment.